Daily Speculations

The Web Site of Victor Niederhoffer & Laurel Kenner

Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

 

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8/22/04:
Thigmomorphogenesis, by Victor Niederhoffer

Trees show adaptive growth responses to the wind where there is a strong prevailing wind direction. The  response is called thigmomorphogenesis, a word that you will probably like to add to your arsenal of market strategies right next to Mr. Boy's shmismogenesis. The main response is that trees exposed to winds grow shorter and have thicker trunks, thicker roots and smaller leaves than those sheltered.

Comment from Bill Craft: Yes, wiring the tree down alters its 'natural' or unfettered growth pattern. It actually makes the stem taller from excess energy not going to diameter growth. Too much stimulation is bad also (hurricane), and STRANGULATION well. So do certain things in the market cause equities to shoot up without adequate bases get harvested (sold) quickly and not revered for longevity. Or build large bases and pay in fat dividends with sales of sugar water? The response of plants to stimulation is important but it is also RANDOM, as what is or can establish vs. what perishes or fails. So yes, live oaks near the coast have windswept crowns and large squat stems. And yes, the ebb and flow of markets is needed to stimulate growth, like wind through  Georgia pines growing tall and straight. But it is more of a case of LIMITING factors than certain inherent responses. I think it is easier to explain why certain things do not do well, or what is LIMITING growth, stocks trees, jobs, life. The point is not a negative but rather a pragmatic approach, peppered with as much counting, moral quandary and laughter that one can stand or understand.  

8/24/04:
Russell Sears comments:

The thimomorphegenesis tree is a solitary tree standing in the middle of farmland, the tree on the edge of the cliff. Generally, not the tree on the edge of a forest with semi shelter from the wind. These are the trees that had an edge in location as a seeding.  In Kansas,  for example, you will notice these trees only around farmers' houses, or former yards, where the  farmer sheltered it, watered it and took pains to make it grow.  Similar trees in less favorable circumstances perished early. In the mountains they are often on a small shelf where enough rot has accumulated to give the tree a base for it roots not to erode away. The foliage and fruit on the thimorphegenesis tree is thickest on the side away from the wind. The twisting of the grain of the tree thus is like pulling on a  lead after it has been wrapped around the hitching post a couple of times. The wind speed determines the degree of "flagging".

The trees that fall are the ones that grow tallest in the forest, not necessarily the ones on the edge. Further, the tree that falls is the one that grew with forest around it, but its neighbors have been cut down, and now it bears the brunt of the wind's forces without adaptive growth.

The tree that falls is the one without fundamental strength, dead decaying sections not always visible until the hollow spot is the snapping point. Even dead trees often do not fall if solid throughout, causing kindling to build up if fires are prevented. These all relate to markets somehow: short interest, recessions, legal/regulatory battles, oligarchies/monopolies, strong leadership, bubbles. A&T, IBM and Google all come to mind.

8/24/04:
George Criparacos comments:

There is a big tree called the baobab that grows in parts of Africa and Australia and can live to more than 1,000 years. Deciduous, it blossoms three months a year. The other nine months, it shows its bear branches, which for many resemble roots; it is also known as the upside tree, as if it is put on the ground with its roots up. On its thick trunk (the biggest I have seen has a diameter of some 6 meters) it conserves water. What has really fascinated me about this tree is that normal ways of counting age (amount of wood circles in trunk section as the tree grows) do not work. The reason is that on long periods of drought the tree actually shrinks as less available water needs less space to be conserved, waiting for better times to grow. Steven Ellison  comments: The Ponderosa pine grows in arid regions at lower elevations than other trees.  At about age 20, the bark thickens and becomes resistant to fire.  Lightning strikes start fires that burn away grass, competing trees, and harmful insects, in the process quickly decomposing their nutrients into usable form.  The Ponderosa cone is serotinous, meaning the seed is only released in the heat of a fire. Only when too much time elapses between fires, as in the last century when people have intervened to put out forest fires, are the mature trees at risk.  Then shade tolerant trees grow between the Ponderosa pines, young Ponderosas crowd the forest, and the fuel level increases to the point that, when a fire does occur, the flames spread into the crowns of the mature pines/

Musing on ponderosa pines has me thinking that lessons from the progression of vegetation over time might be applicable to ever-changing cycles in the market.  Starting with a clear cut, a natural disaster, or an abandoned farm, ragged weeds appear first.  If a seedling of a climax species happens to be present, it is likely to be choked out by the weeds.  However, the weeds give way to other species over time.  There may be several dominant species over hundreds of years before conditions become right for the climax vegetation to flourish. For example, aspen trees along western rivers are a transition species. Eventually, they are displaced by cottonwoods.  However, the aspens always appear first.